THRIVE TOGETHER CLIMATE-RELATED DISCLOSURES REPORT - NATWEST GROUP PLC - NATWEST GROUP ...
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NatWest Group plc Climate-related Disclosures Report Thrive Together
NatWest Group champions potential, helping people, families and businesses to thrive. We are the UK’s leading business bank, and we serve 19 million customers across every region of the UK. We recognise that climate change is a critical global issue and taking the necessary actions to address climate change has the potential to create jobs, transform communities and touch every family in the country. To tackle climate change, we must think long term and act quickly, working in partnership with others so that we can… Thrive Together
Introduction
MOCK-UP IMAGE
Governance
NatWest Group Climate Ambition
Our purpose-led strategy
Contents
Climate is one of three areas of focus in our
purpose-led strategy, alongside Enterprise 1 Introduction 2
and Learning. 2 Governance 12
Our 2021 reporting suite brings together NatWest
Strategy
3 Strategy 18
Group’s financial, non-financial and risk performance Climate
for the year. The reports are designed primarily to 4 Risk Management 47
meet the expectations of our investors, including A leading bank in the UK helping to address
holders of bonds issued under our Green, Social and the climate challenge. 5 Metrics and Targets 57
Sustainability framework, as well as regulators and our
wider stakeholders, including customers, colleagues 6 Glossary 94
and society more broadly. The main reports within this Enterprise
suite and their focus are detailed below and are
available at natwestgroup.com: We are committed to removing barriers to
Risk Management
enterprise and providing businesses in the UK
Company Announcement and with the support they need to grow.
Financial Supplement Assurance approach
Our latest company information including our financial NatWest Group plc appointed Ernst & Young LLP
performance for the year with a focus on key metrics Learning (EY) to provide independent assurance over
and measurement. certain sustainability metrics, indicated with (*)
We are helping people to take control of their in this report. The assurance engagement was
Climate-related Disclosures Report finances, to make the most of their money, planned and performed in accordance with
Details our progress in 2021 on our climate ambitions safely and securely – now and in the future. the International Standard on Assurance
Metrics and Targets
including an overview of our approach to climate- Engagements (UK) 3000 (July 2020), Assurance
related governance, strategy (including scenario Engagements Other than Audits or Reviews of
analysis), risk management, metrics and targets. As signatories of the UN Principles for Historical Financial Information (“ISAE (UK) 3000
Responsible Banking, we are committed to (July 2020)”). An assurance report was
ESG Supplement an ongoing process to align our strategy issued and is available at natwestgroup.com.
Provides an overview of our purpose in action and
with the 2015 Paris Agreement and the This report includes further details on the scope,
key environmental, social and governance matters respective responsibilities, work performed,
including progress in 2021.
UN Sustainable Development Goals (SDGs).
limitations and conclusion
Pillar 3 Report
Glossary
Focuses on our regulatory reporting requirements
and provides an explanation of our risk profile,
including our capital adequacy, risk appetite
and risk management.
NatWest Group plc 2021 Climate-related Disclosures Report 1
Introduction
Introduction
1
Governance
1.1 NatWest Group climate ambition
1.2 A leading bank in the UK helping to address the
climate challenge
Strategy
1.3 Driving our climate ambition
1.4 COP26: Leading by example on a global stage
1.5 Climate-related disclosures overview
Note on Materiality
In general, assessing materiality requires thoughtful consideration not only of any
applicable materiality standards, but also of our purpose in assessing materiality and
Risk Management
in communicating to our stakeholders. Our public disclosures, including our
climate-related and voluntary ESG disclosures, include a range of topics that we
believe are relevant to our businesses and that are of interest to investors and other
stakeholders. For the purposes of complying with our annual, periodic and interim
disclosure obligations in the United Kingdom and the United States we apply a
materiality standard based on the applicable rules and regulations governing public
reporting in the United Kingdom and the United States. However, in our
climate-related and voluntary ESG disclosures, we have adapted our approach
to materiality based on both the subject matter and purpose of the disclosures.
In particular, our approach to these disclosures may sometimes have regard to
broader understandings of materiality based on certain external frameworks and
reporting guidelines that take into consideration a wider range of factors relevant
to climate and ESG disclosures, including the views of our key stakeholders and our
ambition to be a leading bank in the UK helping to address the climate challenge.
Metrics and Targets
This report uses longer time frames to assess potential impacts than those time
frames customarily used in certain of our other disclosures, including our annual,
periodic and interim financial reports submitted to the London Stock Exchange
(“LSE”) in the United Kingdom and to the Securities and Exchange Commission
(“SEC”) in the United States. This layered approach to materiality means that this
report, and many of our climate-related disclosures, including with respect to
climate-related risks and opportunities, and voluntary climate-related disclosures
includes certain information that we have not included in our LSE and SEC filings for
which we use a different approach to materiality. Our approach to materiality in this
report and voluntary climate-related disclosures also means that statements made
in this report and in our other voluntary disclosures use a greater number and level
of assumptions and estimates than many of our LSE and SEC filings. These
assumptions and estimates are subject to change, and, when coupled with the
longer time frames used, make any assessment of materiality inherently uncertain.
Glossary
In addition, our climate risk capabilities and net-zero transition strategy and plan
remain under development, and the data underlying these and market practice in
relation to such disclosures will evolve over time. As a result, we expect that certain
disclosures made in this report and our voluntary climate-related disclosures are
likely to be amended, updated, recalculated and restated in the future.
NatWest Group plc 2021 Climate-related Disclosures Report 2
Introduction
Introduction
1.1 NatWest Group
climate ambition 2021 progress highlights
Governance
Net zero(1)
by 2050
-50% 52% Carbon
At least halve the climate impact of
our financing activity by 2030
of gross lending and investment balances
at 31 December 2019 estimated for
financed emissions. A further eight high
tracking
feature launched in our Retail Banking
carbon emitting sectors estimated
mobile app(6) – in collaboration with CoGo
Strategy
2020: 45% (four sectors)
£100bn £17.5bn(*) COP26
Climate and Sustainable Funding and Climate and Sustainable Funding and Principal partner for the 26th UN Climate
Financing between 1 July 2021 and Financing completed, including £8.1bn Change Conference of the Parties (COP26)
the end of 2025 contribution towards our £100bn target(4)
Risk Management
Notes: 2020: £12bn
1. Refer to section 1.2. for further detail on our
50% 38%(*) £728m(*)
net-zero ambitions.
2. Refer to section 3.5.2 for further detail on
outcomes.
3. Against a 2019 baseline. Direct own operations
is defined as Scope 1, Scope 2 and Scope 3
(paper, water, waste, business travel, of our UK mortgage customers’ of Retail Banking mortgages are at or Retail Banking Green Mortgage
commuting and work from home) emissions. It homes at or above EPC C rating above EPC rating C(5) completions(7)
excludes upstream and downstream emissions
from our value chain. by 2030
4. Having surpassed our previous 2020-21 £20 2020: 36%
billion target during H1 2021, NatWest Group
Metrics and Targets
announced an ambition to provide £100 billion
Climate and Sustainable Funding and
Financing between 1 July 2021 and the end of
2025.
Full phase out of coal Credible transition plan
5. Percentage of £110.3 billion UK Retail Banking
mortgages where EPC data is available.
by 1 January 2030(2) assessments
2020 comparative for England and Wales completed for oil and gas majors and in scope
mortgages only.
coal customers(2)
6. Retail Banking RBS, NatWest and Ulster Bank
Northern Ireland mobile apps.
-50% -46%
7. Retail Banking Green Mortgage products relate
only to mortgages for energy efficient homes
(EPC A or B rated) and are aligned to the
Glossary
World Green Building Council definition of
green mortgages.
(*) Within scope of EY assurance. Refer to page 1.
reduce our direct own operations carbon
(3)
reduction in our direct(3) own operations
footprint by 2025 carbon footprint
NatWest Group plc 2021 Climate-related Disclosures Report 3
Introduction
Introduction continued
1.2 A leading bank in the UK
helping to address the climate challenge
Governance
Net zero by 2050
We have an ambition to achieve net zero by 2050, this includes:
Financed emissions: Greenhouse gas emissions from loans and investments activity, attributable to NatWest Group.
Assets under management: Greenhouse gas emissions associated with our discretionarily managed assets.
Our operational value chain: Greenhouse gas emissions related to the upstream and downstream activities associated with our operations.
Strategy
Accelerating the Helping to end the Championing climate Embedding climate Net-zero emissions
speed of transition to most harmful activity solutions into our culture and for our operational
a net-zero economy decision-making value chain
We have an ambition to support We plan to phase out of coal for We have a target to provide £100 Each year, we plan to include We have a target to reduce our
our UK mortgage customers to UK and non-UK customers who billion Climate and Sustainable targets for executive direct own operations carbon
increase their residential energy have UK coal production, Funding and Financing between remuneration that reflect our footprint by 50% by 2025,
Risk Management
efficiency and incentivise coal fired generation and coal 1 July 2021 and the end of 2025. latest climate ambitions. against a 2019 baseline.
purchasing of the most energy related infrastructure by
efficient homes, with an ambition 1 October 2024, with a full global We have an ambition to at least We plan to reduce the carbon
that 50% of our mortgage phase out by 1 January 2030. halve the climate impact of our footprint for our wider operational
portfolio has an EPC rating financing activity by 2030 and value chain by 50%, against
of C or above by 2030. align with the 2015 Paris a 2019 baseline, by 2030 and
Agreement. To do this, we achieve net zero by 2050.
We plan to collaborate cross plan to quantify our climate
industry and create products and impact and set sector-specific We plan to use only renewable
services to enable customers to targets by the end of 2022. electricity in our direct own global
Metrics and Targets
track their carbon impact. operations by 2025 (RE100) and
We plan to continue the improve our energy productivity
We plan to reduce the carbon integration of the financial 40% by 2025 against a 2015
intensity of our funds and and non-financial risks arising baseline (EP100).
discretionary portfolios by 50% by from climate change into our
2030 and to achieve net zero on enterprise wide risk management We plan to install electric vehicle
discretionarily managed assets framework (EWRMF). charging infrastructure in 15% of
by 2050. spaces across our UK portfolio
by 2030 and upgrade our fleet
of 300 vehicles to electric by
Glossary
2025 (EV100).
NatWest Group plc 2021 Climate-related Disclosures Report 4
Introduction
Introduction continued
1.3 Driving our
climate ambition
Governance
We champion potential; breaking
down barriers and building financial
confidence so the 19 million people, We know the financial sector is a key
enabler in the drive towards net-zero
families and businesses we serve in emissions, so we invited our customers
to COP26 and held events that explained
communities up and down the country the huge opportunity that climate change
can rebuild and thrive.
Strategy
can bring to businesses. We formed
alliances to help customers ‘green’ their
homes, and we set up collaborations with
organisations such as CoGo to help our
Alison Rose
customers understand their carbon
Group Chief Executive Officer
footprint. In this sense, we saw the
conference as an incredible chance
to showcase and develop the practical
support we can offer our retail and
business customers to lower
Risk Management
their emissions.
The climate opportunity Our ‘Springboard to Sustainable Recovery’ For us, this really is positive lending. Not
report clearly highlights this. The report only are we aligning capital in a more With regard to collaborative action, we
When I became CEO of NatWest Group in
shows that small and medium-sized sustainable way, but we also know that it signed up to the UK Government’s joint
November 2019, I made climate one of our
enterprises (SMEs) can deliver a significant makes good business sense. It’s why we declaration on accelerating the transition to
top business priorities. As one of the UK’s
amount of the UK’s abatement targets, if see climate as an area of genuine strategic 100% zero-emission vehicles, as well as
biggest banks – and indeed the biggest for
they get the right support. And this, we growth for our business. announcing that we will be one of 27 new
business – we have both the ability and the
believe, is a huge opportunity for SMEs. members of the Powering Past Coal
responsibility to take a major role in the
fight against climate change. Being a COP26 principal partner Alliance to accelerate the global transition
Demand for the financing to make this from coal – which builds on our existing
Metrics and Targets
Against this backdrop, it was a huge
There is a clear societal duty here, but also happen is already significant. In 2020, we honour this year for NatWest Group to be enhanced coal-lending policy.
an obvious commercial imperative in set out to provide £20 billion of Climate and a principal partner for COP26. We wanted
helping our 19 million customers to take Sustainable Funding and Financing over to achieve two things through our Putting our own house in order
advantage of the many opportunities that two years. I am delighted that we met this participation at the conference: to In 2021, we became a founding member of
moving to net zero brings. Importantly, I initial target in under 18 months, so in demonstrate how we can support our the Net Zero Banking Alliance and joined
believe this is not only good for the planet, October 2021 we committed to an customers; and to ensure that we will play the new coalition of the Glasgow Financial
but good for business too. ambitious new goal of providing an a leading role in the global coalition of Alliance for Net Zero (GFANZ), which
additional £100 billion of Climate and financial services organisations tackling currently includes over 450 financial firms
Sustainable Funding and Financing climate change. across 45 countries focused on broadening,
Glossary
between 1 July 2021 and the end of 2025. deepening and raising net-zero ambitions
NatWest Group plc 2021 Climate-related Disclosures Report 5
Introduction
Introduction continued
Helping people, families and
businesses thrive
Governance
“We continued to develop the Bank of England’s Climate Biennial with British Gas, Worcester Bosch and Committed to disclosure
Exploratory Scenario (CBES) exercise. Shelter, we established the Sustainable Naturally, we want our climate-change
and enhance capabilities Insights from the climate scenarios can be Homes and Buildings Coalition to improve actions and outcomes to be measured
to measure our carbon translated into tangible action that will the energy efficiency of buildings in the UK against our ambitions and aligned with the
enable NatWest Group and its customers to and to address the key blockers to meeting
footprint in relation to our mitigate climate-related risks and take net zero in the UK built environment. And
2015 Paris Agreement. Which is why we
have not only committed to our progress
own operational footprint advantage of the opportunities that the we are helping colleagues and customers being validated by credible third parties, but
transition to net zero will create. to move to electric vehicles through a
and – more importantly – we also take compliance with the Task
Strategy
collaboration with Octopus Energy. Force on Climate-related Financial
our financed emissions” In 2021, we also classified ‘Biodiversity and
Disclosures (TCFD) recommendations very
Nature Loss’ as a formal emerging risk for We have also joined forces with other
seriously. We acknowledge as well, the
NatWest Group. It is critical for NatWest financial firms to launch Carbonplace, a
evolving and often imperfect nature of
Group and our customers to work towards voluntary carbon marketplace. The pilot – a
climate data currently available.
becoming ‘nature positive’ by reducing global first – will initially see NatWest Group
Improvements in the consistency and
negative impacts and increasing the and three other banks team up to create a
standardisation of climate metrics are
restoration of natural capital. We are thriving and transparent global marketplace
across the financial system. It means that undoubtedly key to the progression of the
at the start of this journey, and in 2022 we for carbon offsets, with clear and consistent
NatWest Group is now a prominent integration of climate into our decision-
will work to better understand nature- pricing and standards that more banks are
making processes. Although to a large
Risk Management
presence in the key forums for sustainable related risks and opportunities including in expected to be part of later.
financing, able to use its position to extent this is dependent on broader
NatWest Markets NV as part of the
positively influence market-wide change in Industry-leading initiatives industry comparability, we are committed
European Banking Authority’s pillar 3
the UK and globally. to making our methodologies as robust and
disclosures on ESG risks including Significantly, these industry-leading
transparent as possible. To this end, since
environmental assessment. initiatives occur right across NatWest
Measuring and assessing climate-related our inaugural standalone report in 2021, I
Group. For instance, this year, Coutts has
risk is key for us to deliver on our Building powerful partnerships am delighted in how we have progressed
joined the Net Zero Asset Managers
ambitions: in 2021 we continued to develop our assessment of climate-related risks and
Importantly, we know combating climate initiative and has committed to achieving
and enhance capabilities to measure our opportunities, enhancing our scenario
change must be a collaborative and net-zero investments by 2050. Coutts also
carbon footprint in relation to our own planning, governance and risk management
wide-reaching effort. As such, in 2021 we had the proud distinction of achieving B
Metrics and Targets
operational footprint and – more processes, and developing metrics and
continued to work with other organisations Corp status in 2021.
importantly – our financed emissions. targets. All of which is captured in
to combine and amplify our impact.
Elsewhere, NatWest Markets remains a this document.
We also further integrated climate into our For instance, with fintech company CoGo leading underwriter for green, social and
risk management and developed our we introduced a carbon-tracking feature in sustainability (GSS) bonds issued by UK
scenario analysis capabilities to help us our mobile banking app to help customers corporates and sterling-denominated GSS
better understand our own climate-related reduce the climate impact of their spending. bonds across all sectors. Alison Rose
risks and opportunities. This has been We have also been developing similar tools Group Chief Executive Officer
strengthened through our participation in for our business customers. In association
Glossary
NatWest Group plc 2021 Climate-related Disclosures Report 6
Introduction
Introduction continued
1.4 COP26: Leading by example on a global
stage
Governance
Harnessing a unique opportunity
Engagement: we used our sponsorship of COP26 to build partnerships, relationships
and lay the foundations for a strong legacy.
Finance: we helped demonstrate that the finance sector is a key enabler to tackling climate
change and demonstrated how NatWest Group is playing a leading role.
Enterprise: we showed how we are supporting our customers’ transition to net zero
Strategy
by providing enterprise funding access, raising awareness of opportunities and supporting
the development of skills, capabilities and knowledge.
Customers: we showcased some of our customers already making a difference, giving them
a global platform to support future growth. During the conference 12 SME customers were
exhibited on our stand in the COP26 Green Zone.
Colleagues: we harnessed COP26 opportunities to engage and further educate colleagues.
A platform for powerful partnerships
Risk Management
Leading up to and during COP26, NatWest Group announced a number of new
collaborations designed to help address the climate challenge. Two key initiatives attracted
considerable attention:
1. Our target to provide £100 billion of Climate and Sustainable Funding and Financing
between 1 July 2021 and the end of 2025.
The UK hosted the 26th UN Climate Change Conference 2. Our support for the Powering Past Coal Alliance, in particular our newly announced
of the Parties in Glasgow on 31 October – 13 November commitment to stop lending to UK and non-UK customers who have UK coal production,
coal fired generation and coal-related infrastructure by October 2024 with a full phase out
2021, bringing the world together to seek solutions to the of coal by 1 January 2030.
Metrics and Targets
climate challenges we face. We also focused heavily on the role of businesses in supporting the drive toward net zero.
We hosted HRH The Prince of Wales’ Sustainable Markets Initiative Terra Carta Action
NatWest Group was proud to be a COP26 principal partner, emphasising the role the finance Forum, which brought together partners, customers and charity leaders to examine the
industry has to play in tackling those challenges and supporting our customers in the barriers that tackling climate change bring to SMEs.
transition to net zero. While COP26 achieved much – maintaining the Paris Agreement We hosted a virtual event with CEO Alison Rose and senior leaders from other COP26
ambition to limit warming to well below 2°C, preferably to 1.5°C, specific commitments on principal partners, alongside the UK Government’s Net Zero Business Champion, to discuss
reducing coal use and increased financial aid for developing countries, it is clear more needs the role that businesses can play in helping to tackle climate change. We also helped
to be done. That is why we remain passionate about our role in supporting and accelerating promote business innovation in addressing climate change through our support of the UK
Glossary
the transition to net zero and fostering ever greater cooperation between governments, Government’s Business Climate Hub’s ‘Heroes of Net Zero’ competition and awarded
businesses, regulators and society. £200,000 to climate start-ups through Scottish EDGE funding.
NatWest Group plc 2021 Climate-related Disclosures Report 7
Introduction
Introduction continued
1.5 Climate-related
disclosures overview Gov
ernance
Governance
NatWest Group publicly committed to support the Financial Stability Board’s Strategy
Task Force on Climate-Related Financial Disclosures recommendations in 2017.
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Our first stand-alone 2020 Climate-related Disclosures Report provided updates on Ris
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climate as a key focus area for NatWest Group. During 2021, we have continued to
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progress our work and the tables on the following pages summarise the content of the
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2021 Climate-related Disclosures Report. Refer to page 64 of the NatWest Group plc
Strategy
Annual report and Accounts for our statement on consistency with the TCFD
recommendations.
2021 progress Future priorities Section
Governance
NatWest Group’s governance around climate-related risks and opportunities
Risk Management
The Board’s oversight of – Board monitoring and oversight of climate-related risks and opportunities is supported by clear – Continue to oversee progress against 2.1, 2.2.
climate-related risks roles and responsibilities for the Board and Board Committees, as well as regular management NatWest Group’s climate ambitions and
and opportunities reporting on climate strategy, ambition, and risk management activities. targets, particularly long term reduction in
financed emissions and development of
– Key Board level decisions and areas of discussion and/or challenge related to climate strategy,
transition plans to support this.
climate scenario analysis, risk appetite, reporting controls and embedding climate measures
within remuneration and performance structures. – Continue to build knowledge at Board level
and to support the directors in addressing
– The Boards of NatWest Group’s principal subsidiaries exercised oversight of key climate-related
and overseeing climate-related risks within
risks and opportunities through regular risk reporting and management updates.
NatWest Group’s overall business strategy
Metrics and Targets
and risk appetite.
Management’s role in – NatWest Group CEO and Chief Risk Officer jointly share accountability under the Senior Managers – Further embed operating models and business 2.1, 2.3.
assessing and managing and Certification Regime for identifying and managing the financial risk of climate change. processes to support the management of
climate-related risks climate-related risks and opportunities,
– This responsibility is delegated among the Executive and senior leadership teams. Cross-bank
and opportunities including coordination of actions to support
climate-related groups, advisory teams and committee structures support with collaboration,
further development and execution of climate
escalation, and additional controls.
transition plans.
– The Climate Change Executive Steering Group acts as the primary management
– Continue to maintain a One Bank approach to
forum responsible for overseeing direction and progress on NatWest Group’s
climate strategy development and transition
Glossary
climate-related commitments.
plans, including at subsidiary levels.
NatWest Group plc 2021 Climate-related Disclosures Report 8Introduction
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2021 progress Future priorities Section
Strategy
The actual and potential impacts of climate-related risks and opportunities on NatWest Group’s businesses, strategy and financial planning
Climate-related risks – NatWest Group’s climate ambition, announced in February 2020, recognises various short, – Further enhance capabilities associated 1.1, 1.2, 1.3,
and opportunities medium and long-term climate-related risks and opportunities to embed climate in our business with climate-related risks and 1.4, 3.1, 3.2,
Strategy
identified over the short, and culture, as well as support our customers in their transition to net zero. opportunities measurement. 3.3, 3.4, 3.5,
medium and long term 4.3, 5.1.
The impact of climate- – NatWest Group made a number of environmental, social and ethical (ESE) policy updates during – Continue to integrate climate 1.1, 1.2, 1.3,
related risks and 2021 to help end the most harmful activity and concluded a credible transition plan (CTP) in business activities. 1.4, 3.1, 3.2,
opportunities on our assessments for oil and gas majors and in scope coal customers. This supported our stated 3.3, 3.4, 3.5,
– Further enhance carbon planning capability to
businesses, strategy and ambition to stop lending and underwriting to companies with more than 15% of activities related 3.6, 3.7, 3.8.
support the development of transition plans to
financial planning to thermal and lignite coal, unless they had a CTP in line with the 2015 Paris Agreement in place
measure and track our progress towards our
by the end of 2021.
ambition to halve the climate impact of our
– We continued to harness climate-related opportunities. We exceeded our 2020-2021 Climate and financing activity by 2030.
Risk Management
Sustainable Funding and Financing target in under 18 months and supported our retail customers
with a range of Green Mortgage products.
– Our work on climate scenario analysis has supported our assessment of climate related risks and
opportunities and helped re-affirm our climate ambition. We continued to build powerful
partnerships, acting as a principal partner at COP26, and becoming a founding member of the
Net Zero Banking Alliance and Glasgow Financial Alliance for Net Zero (GFANZ).
– We worked to incorporate climate in the financial planning process by developing our first carbon
plan. This included an assessment of carbon impacts of current and planned climate-related
opportunities as well as climate-related risks, particularly those related to dependencies on future
Metrics and Targets
policy and technology development.
The resilience of our – During 2021, NatWest Group has developed its scenario analysis capabilities and deepened its – Continue to enhance scenario modelling 3.4, 3.7,
strategy, taking into understanding of climate-related risks and opportunities through its participation in the Bank of and analytic capabilities. 3.8, 5.7.
consideration different England’s Climate Biennial Exploratory Scenario (CBES) exercise. NatWest Group has also taken
– Continue to address significant challenges
climate-related scenarios, further steps to translate these insights into tangible action that will enable us and our customers
related to the availability of granular
including a 2°C or to mitigate climate-related risks and take advantage of the opportunities that the transition to net
customer data.
lower scenario zero will create.
– Respond to developing regulatory
– NatWest Group has used three scenarios published by the Bank of England for its CBES exercise
requirements on the approach to
as the foundation for its scenario analysis, including an early action scenario which assumes the
climate-related risk within the regulatory
Glossary
increase in global temperature is limited to under 2.0°C. Also, scenarios have been used
capital regime.
to estimate financed emissions reductions required by 2030 to support our net zero
by 2050 ambition.
NatWest Group plc 2021 Climate-related Disclosures Report 9Introduction
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2021 progress Future priorities Section
Risk Management
How NatWest Group identifies, assesses and manages climate-related risks
Our processes for – Climate risk was incorporated into the NatWest Group risk directory as a principal risk in – Continue enhancements to our enterprise 3.1, 3.2, 4.1.
identifying and assessing February 2021 and in April, Board Risk Committee approved a principles-based climate risk policy wide risk toolkit to support identification
climate-related risks that defined the key requirements for the identification, assessment, and management of climate and assessment of risk impact on other
Strategy
risk, through the incorporation of climate considerations in key risk management processes. principal risks.
– We completed a qualitative assessment of the current and potential impact of physical and
transition climate risk as a causal factor to other risks. This assessment of relative significance
identified the following principal risks as being most exposed to climate-related impacts: credit
risk; operational risk; reputational risk; conduct risk and regulatory compliance risk.
– NatWest Group regularly considers existing and emerging regulatory requirements related to
climate change through external horizon scanning and monitoring of emerging regulatory
requirements which is completed by our Legal, Governance and Regulatory Affairs team.
Our processes – The management of climate risk is largely delivered through three mechanisms: scenario analysis, – Work will continue to further integrate 3.1, 3.2, 4.2.
Risk Management
for managing long-term balance sheet transformation and enhanced climate risk data capabilities. climate-related risk across business processes
climate-related risks – NatWest Group has established a climate risk appetite statement, determining the level of risk to achieve full integration within risk
which the climate risk policy seeks to operate within. management and decision-making.
– A climate maturity rating was developed, which supports ongoing assessment of climate risk – Future target state includes, but is not limited
management throughout the organisation. This approach translated NatWest Group’s climate risk to, climate risk being systematically captured
policy into thematic management outcomes. as a quantified risk factor within lending
– As at 31 December 2021, NatWest Group has achieved first generation implementation of climate and risk decision-making, informing limits
risk management, with a predominantly qualitative approach to internal risk policy outcomes, and pricing.
covering priority sectors or customers. Where quantitative approaches are applied, they are
Metrics and Targets
predominantly conducted on an ad hoc basis.
How our processes for – Retail credit risk: A review of EPC and flood impact was finalised for the Retail Banking residential – Continue to assess impact of climate-related 3.1, 3.2, 4.3.
identifying, assessing, and mortgage portfolio; Credit oversight tracking of EPC and flood risk concentrations have been risks on NatWest Group’s financial and
managing climate-related developed. In addition, preliminary climate operational measures were developed. non-financial risk profile as part of risk and
risks are integrated into – Wholesale credit risk: Continued evolution of our credit risk frameworks to incorporate climate control assessment of relevant processes.
overall risk management risk, for example its inclusion in Transaction Acceptance Standards (TAS) and in climate – Further embedding of climate considerations in
commentary within credit applications for the majority of the wholesale portfolio. product design and lending decisions through
– Operational risk: NatWest Group-wide operational risk climate scenarios were completed in 2021. the use of climate risk data (EPC and flood
Two distinct extreme heat scenarios were considered. analysis, CBES findings).
– Reputational risk: Review of risk acceptance criteria (RAC) suite to validate the sectors which
Glossary
present high environmental, social and ethical (ESE) risk.
– Conduct risk and regulatory compliance risk: Supported the development and embedding of
climate focused questions which have been embedded into the existing governance processes.
NatWest Group plc 2021 Climate-related Disclosures Report 10Introduction
Introduction continued ernance
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Climate-related
Strategy
1.5 Ris
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k Ma geme
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disclosures overview continued
t
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ets
Governance
2021 progress Future priorities Section
Metrics and Targets
The metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material
The metrics used to assess Metrics used to assess climate-related risks: – We will continue to develop metrics 3.4, 3.5, 4.2,
climate-related risks and and measurement capabilities to monitor 4.3, 5.1, 5.2,
– Exposures to heightened climate-related risk sectors.
opportunities in line with and manage climate-related risks and 5.3, 5.4, 5.5,
Strategy
our strategy and risk – Energy efficiency and flood risk assessment for Retail Banking residential mortgage portfolio. opportunities during 2022. 5.6, 5.7.
management process – Capital markets transactions.
– NatWest Group own operational footprint.
– Estimates of financed emissions and emission intensities.
Metrics used to assess climate-related opportunities:
– Climate and Sustainable Funding and Financing.
– NatWest Group Own Green Bond issuance.
We added performance against climate targets as part of the bonus pool assessment for our wider
Risk Management
workforce. Refer to the Directors’ Remuneration Report in the NatWest Group plc 2021 Annual
Report and Accounts for further details.
Scope 1, Scope 2 and, We continued to develop and enhance capabilities to measure our carbon footprint in relation – To support our commitments to the Net Zero 5.6, 5.7, 5.8.
if appropriate, Scope 3 to our own operational footprint as well as financed emissions: Banking Alliance, we will align to the Science
greenhouse gas (GHG) Based Targets initiative’s (SBTi) definition and
– We reduced our direct own operations carbon footprint by 46% against a 2019 baseline,
emissions, and the account for the wider value chain, including
and increased our renewable electricity consumption to 97%.
related risks suppliers, for our own operational footprint.
– We worked on enhancing our capabilities across an additional eight emissions intensive wholesale
– We have submitted our 2030 sector emissions
sectors. We also extended the scope of emissions calculations for the oil and gas sector beyond
reduction estimates to SBTi for validation and
extraction activities covered in 2020. We have now analysed 52% of our loans and investment
Metrics and Targets
will continue our work to enhance availability
portfolio based on 2019 gross on-balance sheet loans and investments.
of data to support future calculations of
financed emissions and emissions intensities.
The targets used to Our stated climate ambition is to be a leading bank in the UK helping to address the climate – We will continue to monitor our performance 1.1, 3.4, 3.5, 5.
manage climate-related challenge. We have committed to achieve net zero by 2050 across our financed emissions, assets against our climate-related targets and
risks and opportunities under management and our operational value chain. Progress is monitored via climate-related ambitions and revise, as appropriate.
and performance targets and ambitions across the following thematic opportunities:
against targets – Accelerating the speed of transition.
– Helping to end the most harmful activity.
Glossary
– Championing climate solutions.
– Embedding climate into our culture and decision-making.
– Net zero for our operational value chain.
NatWest Group plc 2021 Climate-related Disclosures Report 11Introduction
Governance
2
Governance
The Board oversees and the senior
management team manages
NatWest Group’s response to
climate change.
Strategy
2.1 Supporting effective decision-making through
an integrated approach
2.2 Board oversight of climate-related risks
and opportunities
Risk Management
2.3 Management’s role in assessing and managing
climate-related risks and opportunities
Metrics and Targets
Glossary
NatWest Group plc 2021 Climate-related Disclosures Report 12Introduction
Governance
2.1
Supporting effective decision-making through an integrated approach
Board and senior management oversight of climate-related risks and opportunities is supported by embedding climate
within our established governance structure and operating rhythm.
Governance
Board level governance Group Board
Establishes purpose, sets strategic aims, monitors and oversees progress against strategic climate targets and ambitions
Board Risk Committee Audit Committee Sustainable Banking Committee Performance & Remuneration
Considers current and potential future Considers non-financial Oversees progress against Committee
climate risk exposures and climate risk disclosures and controls our purpose and climate ambition Oversees link between climate strategy
appetite reporting and remuneration
Strategy
Executive level governance Group Executive Committee/Group CEO and Accountable Executives
Overall accountability for delivery of sustainable business performance including identifying and managing financial risks from climate change
Executive Risk Committee Executive Disclosure Committee Climate Change Executive Group Reputational Risk Committee
Chaired by the Group CEO, reviews and Chaired by the Group CFO, reviews all Steering Group Chaired by the Group CRO, reviews and
challenges all material risk exposures significant disclosures including ESG Chaired by the Group CEO and Group challenges NWG reputational risk appetite,
including operational, reputational and matters with the support of its ESG CRO, responsible for delivery and policies and material exposures, including
climate risk Disclosure Steering Group implementation of strategic significant climate decisions
climate ambitions
Risk Management
Franchise, Functional and Legal Entity Executive & Risk Committees
Support the Executives in discharging their individual areas of responsibility, including on embedding climate change within each area
Business, services and Franchise, Functional and Legal Entity Executive Climate Leads
functional governance Nominated by their accountable Executives, this group is responsible for sponsoring and leading climate-related activity within their areas.
Examples of local level collaboration groups to support the Leads and their aligned accountable Executives are shown below
Retail Banking Commercial Banking Private Banking
Metrics and Targets
Retail Climate Steering Group Commercial Climate Steering Group Private Climate Change Working Group(1)
RBS International Own Operations NatWest Markets
RBSI Environmental, Social and Driving climate action throughout NWM Climate & Sustainability Committee
Governance Steering Group the operational value chain
Climate Centre of Excellence
Provides guidance, expertise and advisory support bank-wide, including where there are specific capability gaps
Cross-bank Climate Working Groups
Glossary
Play an important role in championing One Bank collaboration across business areas, functions and legal entities
1. Supported by additional Private Banking committees involved in oversight of investment and asset management-related climate activities.
For further information on NatWest Group’s corporate governance framework refer to the Corporate Governance section of the 2021 Annual Report and Accounts.
NatWest Group plc 2021 Climate-related Disclosures Report 13Introduction
Governance continued
2.2
Board oversight of climate-related
risks and opportunities
Governance
Board monitoring and oversight of climate-related risks and opportunities is supported by establishing clear roles
and responsibilities for the Board and Board Committees, as well as robust management reporting on climate
strategy, ambition and risk management activities.
Details of Board and Board Committee activities relating to climate are noted below and in the Corporate Governance section of the 2021 NatWest Group plc Annual Report and
Accounts. At a subsidiary level, the boards of NatWest Group’s principal and material subsidiaries exercised oversight of key climate-related risks and opportunities through risk
Strategy
reporting and management updates.
Board considered climate-related matters at all six scheduled(1) meetings in 2021
The Board received updates from the NatWest Group CEO, Group CFO, Group CRO Board training Climate strategy
and other senior executives on climate-related risk and opportunities impacting
The annual Board climate training Climate matters featured in the
NatWest Group, our customers and key strategic partnerships. session in October helped to enhance Board’s annual strategy discussions in
directors’ climate-related knowledge. June 2021. Directors were invited to
The Board examined the results of climate stress testing and scenario analysis, for This was a comprehensive training consider various purpose
Risk Management
shorter and longer time horizons and reviewed risk appetite updates. The outcome led session where representatives from ‘conundrums’: real life dilemmas that
to the Board approval of the final CBES submission to the PRA. executive management were joined by could arise as NatWest Group seeks to
NatWest Group’s independent climate balance our purpose priorities with
The Climate strategy spotlight opposite explains how climate featured within the adviser, Lord Stern of Brentford, the commercial reality. For example, one
Board’s annual strategy session. A Board Business Insights Pack was received in Chair of the Grantham Research discussion group reflected on how we
advance of every Board meeting, giving directors a snapshot of NatWest Group’s Institute on Climate Change and the could best support the UK economy in
progress against our climate ambition. Committee Chairs also provided the Board with Environment. Areas of focus included its recovery while transforming our
recent key external developments and loan portfolio to meet climate
an overview of relevant climate issues which were discussed at Committee meetings. their impact on NatWest Group, ambitions. These discussions were
including evolving regulatory and followed by an opportunity to share
The Board members also participated in the annual climate training, more details in investor expectations, as well as rising feedback with the Executive team and
Metrics and Targets
the Board training spotlight opposite. external expectations relating explore potential challenges.
to the banking sector as a whole.
Key decisions approved by the board during 2021 include: Directors also discussed expectations
– February: 2020 ESG Supplement and Climate-related Disclosures Report approval. for COP26 from a policy, business,
– April: NatWest Group’s climate risk appetite qualitative statement. and banking perspective.
– September: Final CBES submission.
– October: £100 billion Climate and Sustainable Funding and Financing target.
– October & December: Considered the merits and challenges of submitting a
resolution related to the Group’s climate ambitions at the 2022 AGM.
– December: Approved climate risk appetite measures (refer to section 4.2 for details)
Glossary
and considered the first carbon plan as part of the overall 2022 Budget.
1. Ad hoc meetings and an annual strategy session also took place throughout the year. Climate matters were considered at
some of these additional sessions.
NatWest Group plc 2021 Climate-related Disclosures Report 14Introduction
Governance continued
Board Risk Committee considered climate-related matters at all eight scheduled meetings
in 2021
CBES training
The Committee reviewed NatWest Group’s climate risk profile at every meeting with
reference to the Group Risk Management Report and challenged management to consider ‘Talking heads’
how NatWest Group’s climate-related financial risk profile is articulated through the report, To support their understanding of the
Governance
to ensure appropriate recognition of the significance of the risk. selected CBES scenarios, Board Risk
Committee members were given
The Committee monitored progress on the development of climate risk appetite internally developed ‘talking heads’
video training, which includes core and
quantitative measures in advance of the annual review of Risk Appetite in December 2021. optional modules. This additional
See section 4.2 for further detail. background covered:
Key climate-related matters considered in 2021: – An overview of climate risk and
– April: Approved the climate risk policy, following the elevation of climate risk to principal key risk status. how NatWest Group is addressing
The Committee also recommended NatWest Group’s first climate risk appetite qualitative statement to the challenge;
the Board for approval. – How the CBES exercise supports
effective climate risk management
Strategy
– July: Approved the expansion of the scenarios to be used in the CBES stress test.
and our overall climate ambitions;
– September: Reviewed and recommended the final CBES submission to the Board for approval.
– Background to the scenarios
– October: Received an update on climate risk appetite and measures.
featured in the CBES exercise.
– December: Noted an update on climate risk including Group Climate Change Programme
closure activity. This video training was shared with the
– December: Recommended the climate risk appetite statement and measures to Board for approval as full Board as part of a broader support
part of the annual review of risk appetite. pack prepared in advance of the
Board’s consideration of the final
CBES submission.
Risk Management
Sustainable Banking Committee considered climate-related matters at all five scheduled
meetings in 2021
Budgeting
The Committee dedicated one of its meetings entirely to receiving updates on progress
Our first carbon plan
against NatWest Group’s climate ambition. Since June 2021, the Committee has received a
purpose management information dashboard at every meeting. The dashboard provides a Prior to consideration by the
snapshot of progress against key purpose metrics and targets, including climate. The Board of the overall 2022 Budget,
the Sustainable Banking Committee
Committee received an update on ESG scoring from external ratings agencies and a deep discussed NatWest Group’s first
Metrics and Targets
dive on our first carbon plan, both supporting its oversight of climate progress carbon plan, which was developed
alongside the main five-year
Key climate-related matters considered in 2021: financial plan.
– April: Considered key external developments relating to climate and their potential impact on
NatWest Group. Focus areas included key messages from a recent NGO roundtable and an update on The carbon plan included an
COP26 preparations. assessment of climate impacts of
business changes incorporated in the
– April: During a franchise-led presentation on climate-related returns and opportunities, the Committee
financial plan as well as of climate-
discussed with management the importance of continuing to identify and offer new products, services
related risks and opportunities.
and sustainable funding and financing, to support customers and accelerate the transition to net zero.
– December: Deep dive on NatWest Group’s first carbon plan (refer opposite). Refer to section 3.6 for further details
on the work done to incorporate
Glossary
climate considerations in the financial
planning process.
NatWest Group plc 2021 Climate-related Disclosures Report 15Introduction
Governance continued
Group Audit Committee considered climate-related matters at four of five scheduled
meetings in 2021
The Committee focused on the review of controls surrounding the preparation and
disclosure of climate-related reporting. Its Terms of Reference were expanded in early 2021
to formalise its remit relating to non-financial disclosures. The Committee also received
Governance
updates at each meeting from the Executive Disclosure Committee to maintain visibility of
executive-level activities in relation to climate-related disclosures.
Key climate-related matters considered in 2021:
– February, July and October: Review of external climate disclosures ahead of publication
including the basis of preparation for the disclosures and the controls framework, which
was expanded during the year.
– October: Approved the appointment of the external auditor to undertake assurance
work on certain sustainability disclosures.
Strategy
Group Performance & Remuneration Committee considered climate-related matters at
seven of nine scheduled meetings in 2021
Managing climate-related disclosures
Our ambition ‘to be a leading bank helping to address the climate challenge’ has been a
consideration for senior executive remuneration since 2020. The process continued in 2021 We established a management-level Environmental, Social
with the Committee approving specific climate measures and targets for executive and Governance Disclosures Steering Group in 2019 to
directors and Executive Committee members and assessing progress made at the end of provide additional controls around our climate and
the year as part of the pay decisions for these individuals. broader ESG-related disclosure and reporting. This is a
sub-committee of the Executive Disclosure Committee and operates under the
Risk Management
Key climate-related matters considered in 2021: Group CFO’s delegated authority. The Group comprises the following members:
– As well as reviewing individual performance in 2021, the Committee set three climate
– Director of Sustainable Banking
performance measures for executive directors and ExCo members for 2022. These will
be taken into account in future variable pay decisions. – Head of Treasury, ESG and Disclosure Legal
– A further development in 2021 was the introduction of a climate-specific measure as – Head of Investor Relations
part of the annual bonus scorecard. This now strengthens the link between our climate – Head of Climate Risk
performance and wider workforce remuneration. – Head of Climate & Purpose Finance
– Head of Climate Centre of Excellence
Metrics and Targets
Refer to the Directors’ Remuneration Report in the 2021 Annual Report and Accounts for The ESG Disclosures Steering Group reviews and approves responses to
further information on executive remuneration. environmental, social and governance surveys, as well as ESG Supplement
published on NatWest Group’s website. In 2021, it supported a busy climate
agenda, providing advice and challenge on several initiatives, including ESG
rating agency survey returns and NatWest Group’s climate-related policy
statements announced alongside our participation as a principal partner
of COP26.
Glossary
NatWest Group plc 2021 Climate-related Disclosures Report 16Introduction
Governance continued
2.3
Management’s role in assessing
and managing climate-related
risks and opportunities
Governance
Climate governance at management level begins with NatWest Group CEO
and NatWest Group CRO, who share joint accountability under the Senior
Managers and Certification Regime for identifying and managing the financial
risk of climate change.
– NatWest Group CRO is responsible for ensuring that the financial risks from climate change are reflected
in risk management frameworks and, in line with our three lines of defence model, the Risk function
provides effective independent oversight of the first line of defence.
– NatWest Group CEO’s responsibility for strategic delivery is delegated to the following in her Executive
Strategy
team: NatWest Group CFO, NatWest Group CAO, NatWest Group Director (Strategy & Ventures) and
the Business CEOs.
– Each has shared responsibility for strategic delivery relating to financial risks and opportunities that arise
from climate change ensuring that NatWest Group identifies, measures, monitors, manages and reports
on opportunities as well as exposures to risks. Steering the climate agenda
The Climate Change Executive Steering Group, chaired by the Group CEO and
Management responsibilities and reporting lines CRO during 2021, is the primary management forum responsible for overseeing
direction and progress relating to NatWest Group’s climate-related commitments.
During 2021, the Steering Group focused on the Group Climate Change
The executive-level committees shown in section 2.1 provide support to the executive team. This
Programme, which was tasked with mobilising and monitoring how internal teams
Risk Management
includes leadership teams and pan-bank groups who provide insight, expertise and additional controls
where needed. are delivering the climate-related mandatory change agenda. This included
overseeing progress on meeting the expectations set out in the PRA’s Supervisory
Under our integrated governance structure, business areas are expected to ensure that climate
Statement SS3/19.
considerations are built into day-to-day operational decision-making. The Accountable Executives
are empowered to take decisions within their areas of accountability and responsibility, with clear
Key areas of focus for the group in 2021 included delivery against climate-related
escalation and reporting routes in place to the Climate Change Executive Steering Group, see spotlight
opposite. Nominated by their accountable Executives, climate leads within each business area and regulatory expectations, shaping NatWest Group’s climate change strategy
function are responsible for sponsoring and leading climate-related activity within their areas. including future opportunities as well as risks and overseeing the design of NatWest
Group’s climate change operating and reporting model.
Work is ongoing to integrate climate risk into business-level policies and frameworks, which in turn
will enable climate risk to be effectively managed in the same way as other risk types. This work is led
The Programme came to an end in December 2021. The management governance
Metrics and Targets
by a dedicated climate risk team, which was established in 2021 to discharge second line of defence
accountability of risk oversight and act as a consolidated centre of excellence on climate risk. model will therefore shift from a programme-led approach to a framework
embedded within our existing accountability structures. This will support the full
Several cross-bank climate-related forums support collaboration and continue to play an important role
integration of climate risk within our businesses and functions, while sharpening the
in our climate governance structure. These include a climate lead group of executive delegates and a
Climate Opportunities Group, which drives a One Bank approach to strategic progress. Steering Group’s focus.
The Own Operations Executive Steering Group are responsible for delivery of the climate purpose The Steering Group was refreshed in January 2022 to drive strategic
commitments and the 2025 – 2050 targets for our operational value chain. implementation and delivery. To support this shift, the Director of Strategy and
The Climate Centre of Excellence was created in 2021 to support the implementation of our climate Corporate Development has taken the Chair role. The Group CEO and Group CRO
ambition. The team has in-depth knowledge of climate change that complements capabilities that sit in the remain key members of the Steering Group given their shared accountabilities.
Glossary
rest of the organisation. The Climate Centre of Excellence adds value by providing climate leadership to Membership has also been extended to include the wider executive team who have
support NatWest group and our customers. The Climate Centre of Excellence works with franchises,
climate-related responsibilities delegated from the Group CEO.
functions and external stakeholders, promoting collaboration and driving ambition.
NatWest Group plc 2021 Climate-related Disclosures Report 17You can also read
